IACG Singapore: What are the new guidelines and why is compliance important?
17 August 2021
Let’s go back eleven months. It’s the 10th of September 2020, and the Monetary Authority of Singapore (MAS) have issued the Individual Accountability and Conduct Guidelines (IACG) to prepare financial institutions for a new era of accountability. As you may know, IACG Singapore aims to create and promote a stronger culture of ethics and accountability.
The deadline to comply with these guidelines is now fast approaching. By the 10th of September this year, MAS expect Singapore-based financial institutions (FIs) to have measures in place to abide by IACG. So, almost one year on since the guidelines were first published, do you understand exactly what is expected of you and why compliance is important?
This blog serves as an introduction to IACG Singapore.
What is IACG?
At their core, the guidelines aim to hold senior management accountable for their individual conduct. They also aim to embed a positive culture within FIs, uphold ethical business practices, and maintain robust risk management. Furthermore, the guidelines seek to strengthen oversight of material risk personnel (MRPs) and reinforce standards of proper conduct among FI employees.
All MAS-regulated FIs are required to comply with IACG, although there are a few exceptions to this rule. It is important to understand how IACG applies to you and whether you fall under any exemptions.
Underpinning IACG is the idea of good culture and conduct. Built from this are the five key outcomes of IACG:
- Identify a senior manager who will be responsible for the core functions of the FI
- Ensure that senior managers are fit and proper for their role and take responsibility for the business and employee conduct that they oversee
- Establish a clear governance framework which supports the roles and responsibilities of senior managers
- Ensure all material risk employees are fit and proper to carry out their roles
- Put in place a framework that sustains and promotes healthy culture and good standards of conduct
The MAS state that these guidelines shouldn’t be treated as a ‘tick-box’ exercise but must be embedded into FI practices and day to day business activities. The onus will be on each FI to adapt and implement IACG based on their size and individual requirements.
The importance of compliance
The MAS introduced IACG in an attempt to clamp down on FI misconduct. Specifically, the guidelines came about following multiple scandals within the industry, such as the 1MDB-related fund flows investigations that took place in 2016. The MAS intend to prevent such malpractice from happening again, and instead foster a culture of responsibility and ethical behaviour within the industry.
So why is compliance so important? Firstly, by abiding by the guidelines, you will be supporting the MAS in creating a more ethical culture within FIs, helping to transform the industry for the better. Secondly, failure to do so may lead to severe consequences.
The MAS are not afraid to take enforcement actions when FIs do not address misconduct within their organisation, or when they have a lack of sufficient oversight. From 2019 to 2020, the regulator issued fines totalling $3.4 million. They have even taken criminal action against CEOs and senior managers, as well as revoked the licences of banks.
Once the deadline for IACG arrives in September, it is likely that the MAS will ramp up their enforcement actions against non-compliant FIs.
So, what can we do about it?
With an emphasis on positive change and responsibility, implementing IACG will require a change in mindset to navigate any obstacles to compliance. In their Information Paper, MAS state that “culture is a key driver of conduct… [it] is generally understood as the shared values, attitudes, behaviour and norms in an organisation. It is driven by both the “hardware” (e.g. policies and processes) and “software” (e.g. beliefs and values) in an organisation.” IACG compliance will therefore involve combining organisational process with refreshed values.
Technology will also play a significant role in helping FIs to comply. Andrew Chow, a legal, compliance and tech practitioner at BNP Paribas, states that “When you as a bank look at transaction monitoring you are looking at your own transactions […] but the MAS now has the capability to combine everybody’s flows and whether there are potential issues which were missed. Technology is driving immense change as MAS seeks to better protect investors and uphold market integrity.”
Andrew Chow further remarks that IACG is “somewhat scary, I will admit […] as they involve personal liability on the part of senior managers, not just in the business lines but also in compliance, risk and operations.”
It’s clear that technological solutions are helping to uphold ethical values, while also giving the MAS greater insight into FI activity. Institutions themselves may, too, stand to benefit from utilising technology to both manage their accountability and conduct activities, and to evidence this to the MAS. Collaboration across different departments within FIs will also be crucial to ensure that IACG is effectively rolled out throughout your institution.
For a more in depth look at IACG Singapore, as well how collaboration and technology can help you meet the guidelines, download our e-book: A hybrid approach to IACG compliance.
A hybrid approach to IACG compliance
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